Sixty is the most popular target age for those who want to retire early, according to new research.
The state pension age currently stands at 66, but of those who plan to retire before then, a quarter plan to do so when they reach 60 according to insurer Aviva.
And one in five said they planned to retire even younger, at 55. This is the age at which most people are able to access their private pension savings.
Golden years: A quarter of would-be early retirees say they want to leave work at age 60
Both of these minimum ages are set to increase, with the state pension age moving up to 67 between 2026 and 2028 and the private pension age to 57 in 2028.
Asked for their reasons, nearly one in three people surveyed by Aviva said they wanted to ‘enjoy more freedom, while still being physically fit and well enough’.
More than a quarter said they had decided to retire early primarily because they were financially secure enough to do so – in other words, they could afford not to work.
But the figures also suggested that today’s early retirees may not be as financially secure as they first thought.
Among those who took early retirement, Aviva found that 17 per cent had returned to work, and a further 15 per cent saw themselves doing so in the near future.
How much is the state pension?
The basic state pension is payable to men born before 6 April 1951, and to women born before 6 April 1953. Until 10 April 2022, the maximum amount payable is £137.60 a week.
After that, it will increase by £4.25 to £141.85 per week.
The new state pension is payable to men born on or after 6 April 1951, and to women born on or after 6 April 1953.
The maximum amount payable is £179.60 a week until 10 April 2022, when this will rise by £5.55 to £185.15 per week.
Of these, nearly a quarter said they returned to work because they had experienced financial issues – though slightly more said it was because they ‘wanted a new sense of purpose’.
Meanwhile, a similar number said they ‘missed the company and social interactions with colleagues’ (26 per cent).
Nearly half of all early retirees said their finances worsened as a result, while, only 22 per cent felt they had benefitted financially.
Women were also more likely than men to have felt a negative financial impact from retiring early. Fifty per cent said they had, versus 44 per cent of men,.
Alistair McQueen, head of savings and retirement at Aviva, warned that those wanting to give up work early needed to plan their finances carefully to avoid a forced return.
‘It’s important to learn from the lesson that, while happiness soars in retirement, many people find their finances take the strain when they retire early,’ he said.
‘Money worries are one of the biggest factors resulting in people returning to work.
‘If you aspire to retire early, it’s vital you plan your finances to be sustainable for the long-term.’
How can people afford to retire early?
Aviva also asked people who had retired early about how they were able to afford it.
One in three identified having a defined benefit (final salary) pension among the main measures that enabled them to take retirement into their own hands.
This suggests that younger generations may find it harder to retire early, as the majority of the private sector workforce now saves into defined contribution pension schemes.
However, there are other steps people can take to make an early retirement possible.
Planning ahead: Paying off the mortgage and saving little and often have helped people retire early, with just under a third saying they had done each of these
Paying off the mortgage was identified as the second most common stepping stone to retiring early, with 30 per cent saying they had done this, while almost three in ten early retirees (29 per cent) said saving ‘little and often’ was one of their main strategies.
Nearly one in five (19 per cent) said they also saved extra whenever they received a pay rise or a bonus during their working life.
McQueen added: ‘The turbulent times we’re living through have given many people pause for thought to consider their work-life balance and think more seriously about what makes them happy.
‘Our findings suggest the dream of an early retirement is very much alive and kicking, but there are many factors to consider along the way and the current uncertainty about the future does not make this an easy decision.
‘The experiences of people who’ve already reached early retirement show that small savings habits, which add up over time, are every bit as important as big gestures such as putting aside any year-end bonus.’
For those who decide to keep working after they reach state pension age, there are several benefits.
They no longer need to pay National Insurance Contributions, which means they keep more of their pay packet. And if they do delay taking their pension they may be eligible for more money by the time they eventually retire.
When the time does come to take your pension, there are several options.
Retirees can choose to cash in their pots in full, or take out chunks of money and leave the rest of the pot invested to provide them with an income.
They can also use the money to buy an annuity. This is where you pay an insurance company either a monthly premium or a lump sum.
They then invest the money, and provide the holder with a monthly income for a fixed period or for the rest of their life.
Is the retirement age changing?
From the late 1940s until 2010, the state pension age was 65 for men and 60 for women.
After that, it increased to 66 for both men and women, where it stands today.
A further rise to 67 will take place between 2026 and 2028.
It had been scheduled to rise to 68 between 2044 and 2046, but the government is about to undertake a review on whether that could be brought forward to 2037-39.
The review will take place between now and spring 2023, and will be conducted by the Department for Work and Pensions.
It will consider the latest life expectancy data, the costs of an aging population and the state pension, and labour market trends.
It will also look at differences across countries and regions in the UK, and the potential impact on disadvantaged individuals of waiting longer for a state pension.
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